Barclays, the FTSE's second-worst faller, plunged 54.8 per cent to a low of 867p on 5 October. All the sectors that are outperforming now are the sectors that were underperforming in September. We really are back where we started."This phenomenon can be seen at its most graphic from a look at the behaviour of individual stocks. Even sectors such as engineering and chemicals, which had been underperforming all year, are up sharply on the month.Trevor Greetham, UK market strategist at Merrill Lynch, the US investment bank, says: "There has been a ferocious unwinding of safe-haven bets.

But the sector has rebounded as quickly as it fell.Meanwhile the "safe haven" sectors such as utilities and retailing, which saw some share prices rise in September when all about them were falling, have performed abysmally since.At the same time, 10-year gilts yields have fallen back to 4.5 per cent from a peak of 5 per cent as the panic flight to these supposedly recession- proof instruments has been dramatically reversed. "Fears of global recession, bank failures and distressed sales by hedge funds have been allayed by concerted action by the Group of Seven to reduce interest rates. Investors have been switching funds of bonds into equities, and the powerful rally in world stock markets this has caused has left the bears running for cover."Investors dropped the banking sector like a hot brick as, one after the other, shocks ranging from the Russian bond crisis to the near-collapse of Long-Term Capital Management, the hedge fund, hit home. Now, with the Dow hovering around 9,000 again and the FTSE having regained nearly four-fifths of its losses from the trough of 4,648.7 on 5 October, it all seems like a bad dream. "Suddenly, the skies have cleared," says Omar Sheikh, head of research at brokers Charles Stanley. Most cuts, which follow a 61 per cent drop in third-quarter income, will be in fixed-income and emerging markets.. THIS IS, it seems, fast becoming the crash that never was.

A month ago, with the FTSE 100 down more than 25 per cent from its 20 July peak of 6,179 and New York's Dow Jones falling like a stone, the talk on the dealing floors was of 1929, market meltdown and worldwide economic depression. He insisted last week that the management shake-up was justified.Meanwhile, JP Morgan yesterday confirmed it is seeking to shed around 740 people, 5 per cent of staff, before year-end. The European co-chief executive, Jim Boshart, was yesterday reassuring colleagues that he was staying after rumours that he was also quitting swept the firm.The pressure is now on the new co-heads, Victor Menezes and British-born ex-Kidder Peabody trader Michael Carpenter, to act swiftly to curb the threat of mass defections, insiders said yesterday.Old Salomon hands are questioning whether the two top men at Citigroup, Sandy Weill and John Reed, have the stomach for investment banking.Salomon insiders say the unrest has been triggered by Mr Weill's attempts to force the pace of integration between Citicorp's corporate lending business and Salomon's investment bank.Mr Weill, whose background is in retail financial services, is adamant the promised benefits from cross-selling will be achieved. Amid the turmoil, Citigroup yesterday announced a $2bn share buyback. Feeling is running high among staff at Salomon's purpose-built European headquarters above Victoria Station in London, where Mr Dimon was well regarded. CITIGROUP said yesterday that Steve Black, the global head of equities at Salomon Smith Barney, has quit in the latest fall-out from America's largest banking merger. Mr Black's departure, which came despite several attempts by top people to dissuade him, followed last week's resignation of Citicorp president Jamie Dimon and the sidelining of Deryck Maughan, Salomon's banking head and one of the top-ranking Britons on Wall Street.